Bombardier may need more public funding despite Quebec bailout, say analysts

MONTREAL – Bombardier may need more money than the US$1 billion it will receive from Quebec for its struggling CSeries jet program, two industry experts said Monday as pressure continues to mount for federal financial support.

The Montreal-based plane manufacturer is still walking “a tightrope and could need more cash over the next 12 to 18 months,” said Scotiabank analyst Turan Quettawala in a report.

“As such, a Bailout 2.0 is still very possible.”

Quettawala said the Quebec bailout announced last week may help ease some worries about the company’s long-term survival, adding that a US$3.2 billion writedown of the CSeries program will help Bombardier be more aggressive with price discounts.

But he said he’s worried that the 110- to 160-seat plane may be geared towards an overly specific market and many potential orders have already been won by rivals Airbus and Boeing re-engined aircraft.

He also views Bombardier’s cash forecasts overly optimistic and believes the CSeries will generate small returns for Bombardier compared to the company’s loftier estimates of a few years ago.

Evan Mann, an analyst with corporate bond research company Gimme Credit, said there is a high risk the aircraft’s planned entry into service by mid-2016 will be delayed.

“As a result, Bombardier’s free cash flow shortfalls and high leverage will likely persist longer than anticipated requiring the issuance of more debt to support liquidity,” he wrote in a report.

The two analyses came as Quebec Economy Minister Jacques Daoust continued his pitch for federal funds for Bombardier, saying Monday he will seek “significant” financial contribution for the company from the new Liberal government.

Daoust said Ottawa was right to intervene along with the Ontario government to help that province’s automotive industry and he doesn’t see why it wouldn’t do the same to help Quebec’s aerospace sector.

“It would be normal if there was a federal contribution to share the risk,” he said.

Reports have suggested Quebec wants Ottawa to contribute between $350 million and $1 billion, but Daoust refused to provide a specific amount that he would seek from the new federal government.

The federal cabinet will be sworn into office on Wednesday and Daoust said he won’t wait long to reach out to his new counterpart.

“It is clear that I will call him the same day he is named.”

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